South leads in personal bankruptcy

This article in the Birmingham Business Journal says that bankruptcy rates in some Southern states are among the highest in the nation:

Despite the growth of the Alabama auto industry and other economic gains, the state is reporting bankruptcy rates in 2006 that rank among the highest in the nation.

And with high poverty levels, low job growth and weak consumer protection laws, experts say the state isn't likely to lose its place near the top of the bankruptcy list.

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There is a strong correlation between poverty levels and bankruptcy rates, Norris says, and Alabama's poverty rates have risen in recent years.

In Alabama, 16.9 percent of residents, or about 763,000 people, lived in poverty in 2004, according the U.S. Census Bureau. That's up from 13.3 percent, or 583,000, in 2000.

"When you look at the poverty rate, it's not surprising that we're going to lead the nation in terms of bankruptcies," he says.

Norris notes that seven of the 10 states with the highest per-capita bankruptcies also report poverty rates above the national average.

In Tennessee, for example, which reported the highest rate of bankruptcy in the FDIC report, 15.9 percent of residents were living in poverty in 2004, well above the national rate, which was 12.7 percent. Georgia, the No. 2 state for bankruptcies, reported a 13.1 percent poverty rate.

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Regionally, states in the South and upper Midwest ranked highest for bankruptcies in the recent report. As Norris notes, "you've got a lot of the Rust Belt and the Textile Belt being represented."

The article also notes that although the number of bankruptcy filings are down overall after Congress passed bankruptcy "reforms" last year, because of other factors including state laws in the South that are pro-creditor, and in Alabama's case, a trend towards harsher Chapter 13 filings (state law only protects $5000 of a home's value under Chapter 7), the new laws have not had as much of a "chilling effect" as in other parts of the county.